Firm-Specific, Macroeconomic and Institutional Determinants of Stochastic Uncertain Firm Growth

Tarek Eldomiaty (), Islam Abdel Azim Azzam, Hoda El Kolaly, Marina Apaydin and Monica William
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Tarek Eldomiaty: Onsi Sawiris School of Business, The American University in Cairo, AUC Avenue, P.O. Box 74, New Cairo 11835, Egypt
Islam Abdel Azim Azzam: Onsi Sawiris School of Business, The American University in Cairo, AUC Avenue, P.O. Box 74, New Cairo 11835, Egypt
Hoda El Kolaly: Onsi Sawiris School of Business, The American University in Cairo, AUC Avenue, P.O. Box 74, New Cairo 11835, Egypt
Marina Apaydin: Onsi Sawiris School of Business, The American University in Cairo, AUC Avenue, P.O. Box 74, New Cairo 11835, Egypt
Monica William: The Faculty of Business, Finance Department, Universities of Canada in Egypt, 2PH7+J2W New Administrative, Cairo 4827401, Egypt

Risks, 2025, vol. 13, issue 10, 1-23

Abstract: This study distinguishes between observed, uncertain, and stochastic uncertain firm growth. Observed firm growth is measured via historical growth of fixed assets scaled by growth of sales revenue. Uncertain firm growth is the volatility of unobserved (estimated error terms) firm growth. The latter is simulated using nonuniform Monte Carlo to generate stochastic uncertain firm growth. The objective of this study is to examine the relationships among the firm specific, economic, and institutional factors that affect the uncertain and stochastic uncertain growth of a firm. The sample includes the nonfinancial firms listed in the DJIA30 and NASDAQ100, covering quarterly data from 1996Q1 to 2022Q4 for 121 companies. The results reveal that (a) sales growth, profitability, cash flow, and long-term financing help reduce a firm’s uncertain growth, (b) high involvement in exporting exposes firms to higher geopolitical uncertainty, (c) institutional quality (especially political stability and regulatory quality) paradoxically contribute to uncertain firm growth. This study contributes to related studies via offering perspectives to firm managers and policy makers about the factors that help manage the uncertainties of firm growth.

Keywords: uncertain firm growth; firm-specific determinants; macroeconomic determinants; institutional quality; nonuniform stochastic Monte Carlo simulation; DJIA30; NASDAQ100 (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2025
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